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108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    108-291
======================================================================
 
                CHECK CLEARING FOR THE 21ST CENTURY ACT

                                _______
                                

                October 1, 2003.--Ordered to be printed

                                _______
                                

  Mr. Oxley, from the committee of conference, submitted the following

                           CONFERENCE REPORT

                        [To accompany H.R. 1474]

      The committee of conference on the disagreeing votes of 
the two Houses on the amendment of the Senate to the bill (H.R. 
1474), to facilitate check truncation by authorizing substitute 
checks, to foster innovation in the check collection system 
without mandating receipt of checks in electronic form, and to 
improve the overall efficiency of the Nation's payments system, 
and for other purposes, having met, after full and free 
conference, have agreed to recommend and do recommend to their 
respective Houses as follows:
      That the House recede from its disagreement to the 
amendment of the Senate and agree to the same with an amendment 
as follows:
      In lieu of the matter proposed to be inserted by the 
Senate amendment, insert the following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Check 
Clearing for the 21st Century Act'' or the ``Check 21 Act''.
    (b) Table of Contents.--The table of contents of this Act 
is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings; purposes.
Sec. 3. Definitions.
Sec. 4. General provisions governing substitute checks.
Sec. 5. Substitute check warranties.
Sec. 6. Indemnity.
Sec. 7. Expedited recredit for consumers.
Sec. 8. Expedited recredit procedures for banks.
Sec. 9. Delays in an emergency.
Sec. 10. Measure of damages.
Sec. 11. Statute of limitations and notice of claim.
Sec. 12. Consumer awareness.
Sec. 13. Effect on other law.
Sec. 14. Variation by agreement.
Sec. 15. Regulations.
Sec. 16. Study and report on funds availability.
Sec. 17. Statistical reporting of costs and revenues for transporting 
          checks between Federal Reserve banks.
Sec. 18. Evaluation and report by the Comptroller General.
Sec. 19. Depositary services efficiency and cost reduction.
Sec. 20. Effective date.

SEC. 2. FINDINGS; PURPOSES.

    (a) Findings.--The Congress finds as follows:
            (1) In the Expedited Funds Availability Act, 
        enacted on August 10, 1987, the Congress directed the 
        Board of Governors of the Federal Reserve System to 
        consider establishing regulations requiring Federal 
        reserve banks and depository institutions to provide 
        for check truncation, in order to improve the check 
        processing system.
            (2) In that same Act, the Congress--
                    (A) provided the Board of Governors of the 
                Federal Reserve System with full authority to 
                regulate all aspects of the payment system, 
                including the receipt, payment, collection, and 
                clearing of checks, and related functions of 
                the payment system pertaining to checks; and
                    (B) directed that the exercise of such 
                authority by the Board superseded any State 
                law, including the Uniform Commercial Code, as 
                in effect in any State.
            (3) Check truncation is no less desirable in 2003 
        for both financial service customers and the financial 
        services industry, to reduce costs, improve efficiency 
        in check collections, and expedite funds availability 
        for customers than it was over 15 years ago when 
        Congress first directed the Board to consider 
        establishing such a process.
    (b) Purposes.--The purposes of this Act are as follows:
            (1) To facilitate check truncation by authorizing 
        substitute checks.
            (2) To foster innovation in the check collection 
        system without mandating receipt of checks in 
        electronic form.
            (3) To improve the overall efficiency of the 
        Nation's payments system.

SEC. 3. DEFINITIONS.

     For purposes of this Act, the following definitions shall 
apply:
            (1) Account.--The term ``account'' means a deposit 
        account at a bank.
            (2) Bank.--The term ``bank'' means any person that 
        is located in a State and engaged in the business of 
        banking and includes--
                    (A) any depository institution (as defined 
                in section 19(b)(1)(A) of the Federal Reserve 
                Act);
                    (B) any Federal reserve bank;
                    (C) any Federal home loan bank; or
                    (D) to the extent it acts as a payor--
                            (i) the Treasury of the United 
                        States;
                            (ii) the United States Postal 
                        Service;
                            (iii) a State government; or
                            (iv) a unit of general local 
                        government (as defined in section 
                        602(24) of the Expedited Funds 
                        Availability Act).
            (3) Banking terms.--
                    (A) Collecting bank.--The term ``collecting 
                bank'' means any bank handling a check for 
                collection except the paying bank.
                    (B) Depositary bank.--The term ``depositary 
                bank'' means--
                            (i) the first bank to which a check 
                        is transferred, even if such bank is 
                        also the paying bank or the payee; or
                            (ii) a bank to which a check is 
                        transferred for deposit in an account 
                        at such bank, even if the check is 
                        physically received and indorsed first 
                        by another bank.
                    (C) Paying bank.--The term ``paying bank'' 
                means--
                            (i) the bank by which a check is 
                        payable, unless the check is payable at 
                        or through another bank and is sent to 
                        the other bank for payment or 
                        collection; or
                            (ii) the bank at or through which a 
                        check is payable and to which the check 
                        is sent for payment or collection.
                    (D) Returning bank.--
                            (i) In general.--The term 
                        ``returning bank'' means a bank (other 
                        than the paying or depositary bank) 
                        handling a returned check or notice in 
                        lieu of return.
                            (ii) Treatment as collecting 
                        bank.--No provision of this Act shall 
                        be construed as affecting the treatment 
                        of a returning bank as a collecting 
                        bank for purposes of section 4-202(b) 
                        of the Uniform Commercial Code.
            (4) Board.--The term ``Board'' means the Board of 
        Governors of the Federal Reserve System.
            (5) Business day.--The term ``business day'' has 
        the same meaning as in section 602(3) of the Expedited 
        Funds Availability Act.
            (6) Check.--The term ``check''--
                    (A) means a draft, payable on demand and 
                drawn on or payable through or at an office of 
                a bank, whether or not negotiable, that is 
                handled for forward collection or return, 
                including a substitute check and a travelers 
                check; and
                    (B) does not include a noncash item or an 
                item payable in a medium other than United 
                States dollars.
            (7) Consumer.--The term ``consumer'' means an 
        individual who--
                    (A) with respect to a check handled for 
                forward collection, draws the check on a 
                consumer account; or
                    (B) with respect to a check handled for 
                return, deposits the check into, or cashes the 
                check against, a consumer account.
            (8) Consumer account.--The term ``consumer 
        account'' has the same meaning as in section 602(10) of 
        the Expedited Funds Availability Act.
            (9) Customer.--The term ``customer'' means a person 
        having an account with a bank.
            (10) Forward collection.--The term ``forward 
        collection'' means the transfer by a bank of a check to 
        a collecting bank for settlement or the paying bank for 
        payment.
            (11) Indemnifying bank.--The term ``indemnifying 
        bank'' means a bank that is providing an indemnity 
        under section 6 with respect to a substitute check.
            (12) MICR line.--The terms ``MICR line'' and 
        ``magnetic ink character recognition line'' mean the 
        numbers, which may include the bank routing number, 
        account number, check number, check amount, and other 
        information, that are printed near the bottom of a 
        check in magnetic ink in accordance with generally 
        applicable industry standards.
            (13) Noncash item.--The term ``noncash item'' has 
        the same meaning as in section 602(14) of the Expedited 
        Funds Availability Act.
            (14) Person.--The term ``person'' means a natural 
        person, corporation, unincorporated company, 
        partnership, government unit or instrumentality, trust, 
        or any other entity or organization.
            (15) Reconverting bank.--The term ``reconverting 
        bank'' means--
                    (A) the bank that creates a substitute 
                check; or
                    (B) if a substitute check is created by a 
                person other than a bank, the first bank that 
                transfers or presents such substitute check.
            (16) Substitute check.--The term ``substitute 
        check'' means a paper reproduction of the original 
        check that--
                    (A) contains an image of the front and back 
                of the original check;
                    (B) bears a MICR line containing all the 
                information appearing on the MICR line of the 
                original check, except as provided under 
                generally applicable industry standards for 
                substitute checks to facilitate the processing 
                of substitute checks;
                    (C) conforms, in paper stock, dimension, 
                and otherwise, with generally applicable 
                industry standards for substitute checks; and
                    (D) is suitable for automated processing in 
                the same manner as the original check.
            (17) State.--The term ``State'' has the same 
        meaning as in section 3(a) of the Federal Deposit 
        Insurance Act.
            (18) Truncate.--The term ``truncate'' means to 
        remove an original paper check from the check 
        collection or return process and send to a recipient, 
        in lieu of such original paper check, a substitute 
        check or, by agreement, information relating to the 
        original check (including data taken from the MICR line 
        of the original check or an electronic image of the 
        original check), whether with or without subsequent 
        delivery of the original paper check.
            (19) Uniform commercial code.--The term ``Uniform 
        Commercial Code'' means the Uniform Commercial Code in 
        effect in a State.
            (20) Other terms.--Unless the context requires 
        otherwise, the terms not defined in this section shall 
        have the same meanings as in the Uniform Commercial 
        Code.

SEC. 4. GENERAL PROVISIONS GOVERNING SUBSTITUTE CHECKS.

    (a) No Agreement Required.--A person may deposit, present, 
or send for collection or return a substitute check without an 
agreement with the recipient, so long as a bank has made the 
warranties in section 5 with respect to such substitute check.
    (b) Legal Equivalence.--A substitute check shall be the 
legal equivalent of the original check for all purposes, 
including any provision of any Federal or State law, and for 
all persons if the substitute check--
            (1) accurately represents all of the information on 
        the front and back of the original check as of the time 
        the original check was truncated; and
            (2) bears the legend: ``This is a legal copy of 
        your check. You can use it the same way you would use 
        the original check.''.
    (c) Endorsements.--A bank shall ensure that the substitute 
check for which the bank is the reconverting bank bears all 
endorsements applied by parties that previously handled the 
check (whether in electronic form or in the form of the 
original paper check or a substitute check) for forward 
collection or return.
    (d) Identification of Reconverting Bank.--A bank shall 
identify itself as a reconverting bank on any substitute check 
for which the bank is a reconverting bank so as to preserve any 
previous reconverting bank identifications in conformance with 
generally applicable industry standards.
    (e) Applicable Law.--A substitute check that is the legal 
equivalent of the original check under subsection (b) shall be 
subject to any provision, including any provision relating to 
the protection of customers, of part 229 of title 12 of the 
Code of Federal Regulations, the Uniform Commercial Code, and 
any other applicable Federal or State law as if such substitute 
check were the original check, to the extent such provision of 
law is not inconsistent with this Act.

SEC. 5. SUBSTITUTE CHECK WARRANTIES.

    A bank that transfers, presents, or returns a substitute 
check and receives consideration for the check warrants, as a 
matter of law, to the transferee, any subsequent collecting or 
returning bank, the depositary bank, the drawee, the drawer, 
the payee, the depositor, and any endorser (regardless of 
whether the warrantee receives the substitute check or another 
paper or electronic form of the substitute check or original 
check) that--
            (1) the substitute check meets all the requirements 
        for legal equivalence under section 4(b); and
            (2) no depositary bank, drawee, drawer, or endorser 
        will receive presentment or return of the substitute 
        check, the original check, or a copy or other paper or 
        electronic version of the substitute check or original 
        check such that the bank, drawee, drawer, or endorser 
        will be asked to make a payment based on a check that 
        the bank, drawee, drawer, or endorser has already paid.

SEC. 6. INDEMNITY.

    (a) Indemnity.--A reconverting bank and each bank that 
subsequently transfers, presents, or returns a substitute check 
in any electronic or paper form, and receives consideration for 
such transfer, presentment, or return shall indemnify the 
transferee, any subsequent collecting or returning bank, the 
depositary bank, the drawee, the drawer, the payee, the 
depositor, and any endorser, up to the amount described in 
subsections (b) and (c), as applicable, to the extent of any 
loss incurred by any recipient of a substitute check if that 
loss occurred due to the receipt of a substitute check instead 
of the original check.
    (b) Indemnity Amount.--
            (1) Amount in event of breach of warranty.--The 
        amount of the indemnity under subsection (a) shall be 
        the amount of any loss (including costs and reasonable 
        attorney's fees and other expenses of representation) 
        proximately caused by a breach of a warranty provided 
        under section 5.
            (2) Amount in absence of breach of warranty.--In 
        the absence of a breach of a warranty provided under 
        section 5, the amount of the indemnity under subsection 
        (a) shall be the sum of--
                    (A) the amount of any loss, up to the 
                amount of the substitute check; and
                    (B) interest and expenses (including costs 
                and reasonable attorney's fees and other 
                expenses of representation).
    (c) Comparative Negligence.--
            (1) In general.--If a loss described in subsection 
        (a) results in whole or in part from the negligence or 
        failure to act in good faith on the part of an 
        indemnified party, then that party's indemnification 
        under this section shall be reduced in proportion to 
        the amount of negligence or bad faith attributable to 
        that party.
            (2) Rule of construction.--Nothing in this 
        subsection reduces the rights of a consumer or any 
        other person under the Uniform Commercial Code or other 
        applicable provision of Federal or State law.
    (d) Effect of Producing Original Check or Copy.--
            (1) In general.--If the indemnifying bank produces 
        the original check or a copy of the original check 
        (including an image or a substitute check) that 
        accurately represents all of the information on the 
        front and back of the original check (as of the time 
        the original check was truncated) or is otherwise 
        sufficient to determine whether or not a claim is 
        valid, the indemnifying bank shall--
                    (A) be liable under this section only for 
                losses covered by the indemnity that are 
                incurred up to the time that the original check 
                or copy is provided to the indemnified party; 
                and
                    (B) have a right to the return of any funds 
                it has paid under the indemnity in excess of 
                those losses.
            (2) Coordination of indemnity with implied 
        warranty.--The production of the original check, a 
        substitute check, or a copy under paragraph (1) by an 
        indemnifying bank shall not absolve the bank from any 
        liability on a warranty established under this Act or 
        any other provision of law.
    (e) Subrogation of Rights.--
            (1) In general.--Each indemnifying bank shall be 
        subrogated to the rights of any indemnified party to 
        the extent of the indemnity.
            (2) Recovery under warranty.--A bank that 
        indemnifies a party under this section may attempt to 
        recover from another party based on a warranty or other 
        claim.
            (3) Duty of indemnified party.--Each indemnified 
        party shall have a duty to comply with all reasonable 
        requests for assistance from an indemnifying bank in 
        connection with any claim the indemnifying bank brings 
        against a warrantor or other party related to a check 
        that forms the basis for the indemnification.

SEC. 7. EXPEDITED RECREDIT FOR CONSUMERS.

    (a) Recredit Claims.--
            (1) In general.--A consumer may make a claim for 
        expedited recredit from the bank that holds the account 
        of the consumer with respect to a substitute check, if 
        the consumer asserts in good faith that--
                    (A) the bank charged the consumer's account 
                for a substitute check that was provided to the 
                consumer;
                    (B) either--
                            (i) the check was not properly 
                        charged to the consumer's account; or
                            (ii) the consumer has a warranty 
                        claim with respect to such substitute 
                        check;
                    (C) the consumer suffered a resulting loss; 
                and
                    (D) the production of the original check or 
                a better copy of the original check is 
                necessary to determine the validity of any 
                claim described in subparagraph (B).
            (2) 40-day period.--Any claim under paragraph (1) 
        with respect to a consumer account may be submitted by 
        a consumer before the end of the 40-day period 
        beginning on the later of--
                    (A) the date on which the financial 
                institution mails or delivers, by a means 
                agreed to by the consumer, the periodic 
                statement of account for such account which 
                contains information concerning the transaction 
                giving rise to the claim; or
                    (B) the date on which the substitute check 
                is made available to the consumer.
            (3) Extension under extenuating circumstances.--If 
        the ability of the consumer to submit the claim within 
        the 40-day period under paragraph (2) is delayed due to 
        extenuating circumstances, including extended travel or 
        the illness of the consumer, the 40-day period shall be 
        extended by a reasonable amount of time.
    (b) Procedures for Claims.--
            (1) In general.--To make a claim for an expedited 
        recredit under subsection (a) with respect to a 
        substitute check, the consumer shall provide to the 
        bank that holds the account of such consumer--
                    (A) a description of the claim, including 
                an explanation of--
                            (i) why the substitute check was 
                        not properly charged to the consumer's 
                        account; or
                            (ii) the warranty claim with 
                        respect to such check;
                    (B) a statement that the consumer suffered 
                a loss and an estimate of the amount of the 
                loss;
                    (C) the reason why production of the 
                original check or a better copy of the original 
                check is necessary to determine the validity of 
                the charge to the consumer's account or the 
                warranty claim; and
                    (D) sufficient information to identify the 
                substitute check and to investigate the claim.
            (2) Claim in writing.--
                    (A) In general.--The bank holding the 
                consumer account that is the subject of a claim 
                by the consumer under subsection (a) may, in 
                the discretion of the bank, require the 
                consumer to submit the information required 
                under paragraph (1) in writing.
                    (B) Means of submission.--A bank that 
                requires a submission of information under 
                subparagraph (A) may permit the consumer to 
                make the submission electronically, if the 
                consumer has agreed to communicate with the 
                bank in that manner.
    (c) Recredit to Consumer.--
            (1) Conditions for recredit.--The bank shall 
        recredit a consumer account in accordance with 
        paragraph (2) for the amount of a substitute check that 
        was charged against the consumer account if--
                    (A) a consumer submits a claim to the bank 
                with respect to that substitute check that 
                meets the requirement of subsection (b); and
                    (B) the bank has not--
                            (i) provided to the consumer--
                                    (I) the original check; or
                                    (II) a copy of the original 
                                check (including an image or a 
                                substitute check) that 
                                accurately represents all of 
                                the information on the front 
                                and back of the original check, 
                                as of the time at which the 
                                original check was truncated; 
                                and
                            (ii) demonstrated to the consumer 
                        that the substitute check was properly 
                        charged to the consumer account.
            (2) Timing of recredit.--
                    (A) In general.--The bank shall recredit 
                the consumer's account for the amount described 
                in paragraph (1) no later than the end of the 
                business day following the business day on 
                which the bank determines the consumer's claim 
                is valid.
                    (B) Recredit pending investigation.--If the 
                bank has not yet determined that the consumer's 
                claim is valid before the end of the 10th 
                business day after the business day on which 
                the consumer submitted the claim, the bank 
                shall recredit the consumer's account for--
                            (i) the lesser of the amount of the 
                        substitute check that was charged 
                        against the consumer account, or 
                        $2,500, together with interest if the 
                        account is an interest-bearing account, 
                        no later than the end of such 10th 
                        business day; and
                            (ii) the remaining amount of the 
                        substitute check that was charged 
                        against the consumer account, if any, 
                        together with interest if the account 
                        is an interest-bearing account, not 
                        later than the 45th calendar day 
                        following the business day on which the 
                        consumer submits the claim.
    (d) Availability of Recredit.--
            (1) Next business day availability.--Except as 
        provided in paragraph (2), a bank that provides a 
        recredit to a consumer account under subsection (c) 
        shall make the recredited funds available for 
        withdrawal by the consumer by the start of the next 
        business day after the business day on which the bank 
        recredits the consumer's account under subsection (c).
            (2) Safeguard exceptions.--A bank may delay 
        availability to a consumer of a recredit provided under 
        subsection (c)(2)(B)(i) until the start of either the 
        business day following the business day on which the 
        bank determines that the consumer's claim is valid or 
        the 45th calendar day following the business day on 
        which the consumer submits a claim for such recredit in 
        accordance with subsection (b), whichever is earlier, 
        in any of the following circumstances:
                    (A) New accounts.--The claim is made during 
                the 30-day period beginning on the business day 
                the consumer account was established.
                    (B) Repeated overdrafts.--Without regard to 
                the charge that is the subject of the claim for 
                which the recredit was made--
                            (i) on 6 or more business days 
                        during the 6-month period ending on the 
                        date on which the consumer submits the 
                        claim, the balance in the consumer 
                        account was negative or would have 
                        become negative if checks or other 
                        charges to the account had been paid; 
                        or
                            (ii) on 2 or more business days 
                        during such 6-month period, the balance 
                        in the consumer account was negative or 
                        would have become negative in the 
                        amount of $5,000 or more if checks or 
                        other charges to the account had been 
                        paid.
                    (C) Prevention of fraud losses.--The bank 
                has reasonable cause to believe that the claim 
                is fraudulent, based on facts (other than the 
                fact that the check in question or the consumer 
                is of a particular class) that would cause a 
                well-grounded belief in the mind of a 
                reasonable person that the claim is fraudulent.
            (3) Overdraft fees.--No bank that, in accordance 
        with paragraph (2), delays the availability of a 
        recredit under subsection (c) to any consumer account 
        may impose any overdraft fees with respect to drafts 
        drawn by the consumer on such recredited amount before 
        the end of the 5-day period beginning on the date 
        notice of the delay in the availability of such amount 
        is sent by the bank to the consumer.
    (e) Reversal of Recredit.--A bank may reverse a recredit to 
a consumer account if the bank--
            (1) determines that a substitute check for which 
        the bank recredited a consumer account under subsection 
        (c) was in fact properly charged to the consumer 
        account; and
            (2) notifies the consumer in accordance with 
        subsection (f)(3).
    (f) Notice to Consumer.--
            (1) Notice if consumer claim not valid.--If a bank 
        determines that a substitute check subject to the 
        consumer's claim was in fact properly charged to the 
        consumer's account, the bank shall send to the 
        consumer, no later than the business day following the 
        business day on which the bank makes a determination--
                    (A) the original check or a copy of the 
                original check (including an image or a 
                substitute check) that--
                            (i) accurately represents all of 
                        the information on the front and back 
                        of the original check (as of the time 
                        the original check was truncated); or
                            (ii) is otherwise sufficient to 
                        determine whether or not the consumer's 
                        claim is valid; and
                    (B) an explanation of the basis for the 
                determination by the bank that the substitute 
                check was properly charged, including a 
                statement that the consumer may request copies 
                of any information or documents on which the 
                bank relied in making the determination.
            (2) Notice of recredit.--If a bank recredits a 
        consumer account under subsection (c), the bank shall 
        send to the consumer, no later than the business day 
        following the business day on which the bank makes the 
        recredit, a notice of--
                    (A) the amount of the recredit; and
                    (B) the date the recredited funds will be 
                available for withdrawal.
            (3) Notice of reversal of recredit.--In addition to 
        the notice required under paragraph (1), if a bank 
        reverses a recredited amount under subsection (e), the 
        bank shall send to the consumer, no later than the 
        business day following the business day on which the 
        bank reverses the recredit, a notice of--
                    (A) the amount of the reversal; and
                    (B) the date the recredit was reversed.
            (4) Mode of delivery.--A notice described in this 
        subsection shall be delivered by United States mail or 
        by any other means through which the consumer has 
        agreed to receive account information.
    (g) Other Claims Not Affected.--Providing a recredit in 
accordance with this section shall not absolve the bank from 
liability for a claim made under any other law, such as a claim 
for wrongful dishonor under the Uniform Commercial Code, or 
from liability for additional damages under section 6 or 10.
    (h) Clarification Concerning Consumer Possession.--A 
consumer who was provided a substitute check may make a claim 
for an expedited recredit under this section with regard to a 
transaction involving the substitute check whether or not the 
consumer is in possession of the substitute check.
    (i) Scope of Application.--This section shall only apply to 
customers who are consumers.

SEC. 8. EXPEDITED RECREDIT PROCEDURES FOR BANKS.

    (a) Recredit Claims.--
            (1) In general.--A bank may make a claim against an 
        indemnifying bank for expedited recredit for which that 
        bank is indemnified if--
                    (A) the claimant bank (or a bank that the 
                claimant bank has indemnified) has received a 
                claim for expedited recredit from a consumer 
                under section 7 with respect to a substitute 
                check or would have been subject to such a 
                claim had the consumer's account been charged;
                    (B) the claimant bank has suffered a 
                resulting loss or is obligated to recredit a 
                consumer account under section 7 with respect 
                to such substitute check; and
                    (C) production of the original check, 
                another substitute check, or a better copy of 
                the original check is necessary to determine 
                the validity of the charge to the customer 
                account or any warranty claim connected with 
                such substitute check.
            (2) 120-day period.--Any claim under paragraph (1) 
        may be submitted by the claimant bank to an 
        indemnifying bank before the end of the 120-day 
        beginning on the date of the transaction that gave rise 
        to the claim.
    (b) Procedures for Claims.--
            (1) In general.--To make a claim under subsection 
        (a) for an expedited recredit relating to a substitute 
        check, the claimant bank shall send to the indemnifying 
        bank--
                    (A) a description of--
                            (i) the claim, including an 
                        explanation of why the substitute check 
                        cannot be properly charged to the 
                        consumer account; or
                            (ii) the warranty claim;
                    (B) a statement that the claimant bank has 
                suffered a loss or is obligated to recredit the 
                consumer's account under section 7, together 
                with an estimate of the amount of the loss or 
                recredit;
                    (C) the reason why production of the 
                original check, another substitute check, or a 
                better copy of the original check is necessary 
                to determine the validity of the charge to the 
                consumer account or the warranty claim; and
                    (D) information sufficient for the 
                indemnifying bank to identify the substitute 
                check and to investigate the claim.
            (2) Requirements relating to copies of substitute 
        checks.--If the information submitted by a claimant 
        bank pursuant to paragraph (1) in connection with a 
        claim for an expedited recredit includes a copy of any 
        substitute check for which any such claim is made, the 
        claimant bank shall take reasonable steps to ensure 
        that any such copy cannot be--
                    (A) mistaken for the legal equivalent of 
                the check under section 4(b); or
                    (B) sent or handled by any bank, including 
                the indemnifying bank, as a forward collection 
                or returned check.
            (3) Claim in writing.--
                    (A) In general.--An indemnifying bank may, 
                in the discretion of the bank, require the 
                claimant bank to submit the information 
                required by paragraph (1) in writing, including 
                a copy of the written or electronically 
                submitted claim, if any, that the consumer 
                provided in accordance with section 7(b).
                    (B) Means of submission.--An indemnifying 
                bank that requires a submission of information 
                under subparagraph (A) may permit the claimant 
                bank to make the submission electronically, if 
                the claimant bank has agreed to communicate 
                with the indemnifying bank in that manner.
    (c) Recredit by Indemnifying Bank.--
            (1) Prompt action required.--No later than 10 
        business days after the business day on which an 
        indemnifying bank receives a claim under subsection (a) 
        from a claimant bank with respect to a substitute 
        check, the indemnifying bank shall--
                    (A) provide, to the claimant bank, the 
                original check (with respect to such substitute 
                check) or a copy of the original check 
                (including an image or a substitute check) 
                that--
                            (i) accurately represents all of 
                        the information on the front and back 
                        of the original check (as of the time 
                        the original check was truncated); or
                            (ii) is otherwise sufficient to 
                        determine the bank's claim is not 
                        valid; and
                    (B) recredit the claimant bank for the 
                amount of the claim up to the amount of the 
                substitute check, plus interest if applicable; 
                or
                    (C) provide information to the claimant 
                bank as to why the indemnifying bank is not 
                obligated to comply with subparagraph (A) or 
                (B).
            (2) Recredit does not abrogate other liabilities.--
        Providing a recredit under this subsection to a 
        claimant bank with respect to a substitute check shall 
        not absolve the indemnifying bank from liability for 
        claims brought under any other law or from additional 
        damages under section 6 or 10 with respect to such 
        check.
            (3) Refund to indemnifying bank.--If a claimant 
        bank reverses, in accordance with section 7(e), a 
        recredit previously made to a consumer account under 
        section 7(c), or otherwise receives a credit or 
        recredit with regard to such substitute check, the 
        claimant bank shall promptly refund to any indemnifying 
        bank any amount previously advanced by the indemnifying 
        bank in connection with such substitute check.
    (d) Production of Original Check or a Sufficient Copy 
Governed by Section 6(d).--If the indemnifying bank provides 
the claimant bank with the original check or a copy of the 
original check (including an image or a substitute check) under 
subsection (c)(1)(A), section 6(d) shall govern any right of 
the indemnifying bank to any repayment of any funds the 
indemnifying bank has recredited to the claimant bank pursuant 
to subsection (c).

SEC. 9. DELAYS IN AN EMERGENCY.

    A delay by a bank beyond the time limits prescribed or 
permitted by this Act shall be excused if the delay is caused 
by interruption of communication or computer facilities, 
suspension of payments by another bank, war, emergency 
conditions, failure of equipment, or other circumstances beyond 
the control of a bank and if the bank uses such diligence as 
the circumstances require.

SEC. 10. MEASURE OF DAMAGES.

    (a) Liability.--
            (1) In general.--Except as provided in section 6, 
        any person who, in connection with a substitute check, 
        breaches any warranty under this Act or fails to comply 
        with any requirement imposed by, or regulation 
        prescribed pursuant to, this Act with respect to any 
        other person shall be liable to such person in an 
        amount equal to the sum of--
                    (A) the lesser of--
                            (i) the amount of the loss suffered 
                        by the other person as a result of the 
                        breach or failure; or
                            (ii) the amount of the substitute 
                        check; and
                    (B) interest and expenses (including costs 
                and reasonable attorney's fees and other 
                expenses of representation) related to the 
                substitute check.
            (2) Offset of recredits.--The amount of damages any 
        person receives under paragraph (1), if any, shall be 
        reduced by the amount, if any, that the claimant 
        receives and retains as a recredit under section 7 or 
        8.
    (b) Comparative Negligence.--
            (1) In general.--If a person incurs damages that 
        resulted in whole or in part from the negligence or 
        failure of that person to act in good faith, then the 
        amount of any liability due to that person under 
        subsection (a) shall be reduced in proportion to the 
        amount of negligence or bad faith attributable to that 
        person.
            (2) Rule of construction.--Nothing in this 
        subsection reduces the rights of a consumer or any 
        other person under the Uniform Commercial Code or other 
        applicable provision of Federal or State law.

SEC. 11. STATUTE OF LIMITATIONS AND NOTICE OF CLAIM.

    (a) Actions Under This Act.--
            (1) In general.--An action to enforce a claim under 
        this Act may be brought in any United States district 
        court, or in any other court of competent jurisdiction, 
        before the end of the 1-year period beginning on the 
        date the cause of action accrues.
            (2) Accrual.--A cause of action accrues as of the 
        date the injured party first learns, or by which such 
        person reasonably should have learned, of the facts and 
        circumstances giving rise to the cause of action.
    (b) Discharge of Claims.--Except as provided in subsection 
(c), unless a person gives notice of a claim to the 
indemnifying or warranting bank within 30 days after the person 
has reason to know of the claim and the identity of the 
indemnifying or warranting bank, the indemnifying or warranting 
bank is discharged from liability in an action to enforce a 
claim under this Act to the extent of any loss caused by the 
delay in giving notice of the claim.
    (c) Notice of Claim by Consumer.--A timely claim by a 
consumer under section 7 for expedited recredit constitutes 
timely notice of a claim by the consumer for purposes of 
subsection (b).

SEC. 12. CONSUMER AWARENESS.

    (a) In General.--Each bank shall provide, in accordance 
with subsection (b), a brief notice about substitute checks 
that describes--
            (1) how a substitute check is the legal equivalent 
        of an original check for all purposes, including any 
        provision of any Federal or State law, and for all 
        persons, if the substitute check--
                    (A) accurately represents all of the 
                information on the front and back of the 
                original check as of the time at which the 
                original check was truncated; and
                    (B) bears the legend: `This is a legal copy 
                of your check. You can use it in the same way 
                you would use the original check.'; and
            (2) the consumer recredit rights established under 
        section 7 when a consumer believes in good faith that a 
        substitute check was not properly charged to the 
        account of the consumer.
    (b) Distribution.--
            (1) Existing customers.--With respect to consumers 
        who are customers of a bank on the effective date of 
        this Act and who receive original checks or substitute 
        checks, a bank shall provide the notice described in 
        subsection (a) to each such consumer no later than the 
        first regularly scheduled communication with the 
        consumer after the effective date of this Act.
            (2) New account holders.--A bank shall provide the 
        notice described in subsection (a) to each consumer who 
        will receive original checks or substitute checks, 
        other than existing customers referred to in paragraph 
        (1), at the time at which the customer relationship is 
        initiated.
            (3) Mode of delivery.--A bank may send the notices 
        required by this subsection by United States mail or by 
        any other means through which the consumer has agreed 
        to receive account information.
            (4) Consumers who request copies of checks.--Notice 
        shall be provided to each consumer of the bank that 
        requests a copy of a check and receives a substitute 
        check, at the time of the request.
    (c) Model Language.--
            (1) In general.--Before the end of the 9-month 
        period beginning on the date of the enactment of this 
        Act, the Board shall publish model forms and clauses 
        that a bank may use to describe each of the elements 
        required by subsection (a).
            (2) Safe harbor.--
                    (A) In general.--A bank shall be treated as 
                being in compliance with the requirements of 
                subsection (a) if the bank's substitute check 
                notice uses a model form or clause published by 
                the Board and such model form or clause 
                accurately describes the bank's policies and 
                practices.
                    (B) Deletion or rearrangement.--A bank may 
                delete any information in the model form or 
                clause that is not required by this Act or 
                rearrange the format.
            (3) Use of model language not required.--This 
        section shall not be construed as requiring any bank to 
        use a model form or clause that the Board prepares 
        under this subsection.

SEC. 13. EFFECT ON OTHER LAW.

     This Act shall supersede any provision of Federal or State 
law, including the Uniform Commercial Code, that is 
inconsistent with this Act, but only to the extent of the 
inconsistency.

SEC. 14. VARIATION BY AGREEMENT.

    (a) Section 8.--Any provision of section 8 may be varied by 
agreement of the banks involved.
    (b) No Other Provisions May Be Varied.--Except as provided 
in subsection (a), no provision of this Act may be varied by 
agreement of any person or persons.

SEC. 15. REGULATIONS.

    The Board may prescribe such regulations as the Board 
determines to be necessary to implement, prevent circumvention 
or evasion of, or facilitate compliance with the provisions of 
this Act.

SEC. 16. STUDY AND REPORT ON FUNDS AVAILABILITY.

    (a) Study.--In order to evaluate the implementation and the 
impact of this Act, the Board shall conduct a study of--
            (1) the percentage of total checks cleared in which 
        the paper check is not returned to the paying bank;
            (2) the extent to which banks make funds available 
        to consumers for local and nonlocal checks prior to the 
        expiration of maximum hold periods;
            (3) the length of time within which depositary 
        banks learn of the nonpayment of local and nonlocal 
        checks;
            (4) the increase or decrease in check-related 
        losses over the study period; and
            (5) the appropriateness of the time periods and 
        amount limits applicable under sections 603 and 604 of 
        the Expedited Funds Availability Act, as in effect on 
        the date of enactment of this Act.
    (b) Report to Congress.--Before the end of the 30-month 
period beginning on the effective date of this Act, the Board 
shall submit a report to the Congress containing the results of 
the study conducted under this section, together with 
recommendations for legislative action.

SEC. 17. STATISTICAL REPORTING OF COSTS AND REVENUES FOR TRANSPORTING 
                    CHECKS BETWEEN RESERVE BANKS.

    In the annual report prepared by the Board for the first 
full calendar year after the date of enactment of this Act and 
in each of the 9 subsequent annual reports by the Board, the 
Board shall include the amount of operating costs attributable 
to, and an estimate of the Federal Reserve banks' imputed 
revenues derived from, the transportation of commercial checks 
between Federal Reserve bank check processing centers.

SEC. 18. EVALUATION AND REPORT BY THE COMPTROLLER GENERAL.

    (a) Study.--During the 5-year period beginning on the date 
of the enactment of this Act, the Comptroller General of the 
United States shall evaluate the implementation and 
administration of this Act, including--
            (1) an estimate of the gains in economic efficiency 
        made possible from check truncation;
            (2) an evaluation of the benefits accruing to 
        consumers and financial institutions from reduced 
        transportation costs, longer hours for accepting 
        deposits for credit within 1 business day, the impact 
        of fraud losses, and an estimate of consumers' share of 
        the total benefits derived from this Act; and
            (3) an assessment of consumer acceptance of the 
        check truncation process resulting from this Act, as 
        well as any new costs incurred by consumers who had 
        their original checks returned with their regular 
        monthly statements prior to the date of enactment of 
        this Act.
    (b) Report to Congress.--Before the end of the 5-year 
period referred to in subsection (a), the Comptroller General 
shall submit a report to the Congress containing the findings 
and conclusions of the Comptroller General in connection with 
the evaluation conducted pursuant to subsection (a), together 
with such recommendations for legislative and administrative 
action as the Comptroller General may determine to be 
appropriate.

SEC. 19. DEPOSITARY SERVICES EFFICIENCY AND COST REDUCTION.

    (a) Findings.--The Congress finds as follows:
            (1) The Secretary of the Treasury has long 
        compensated financial institutions for various critical 
        depositary and financial agency services provided for 
        or on behalf of the United States by--
                    (A) placing large balances, commonly 
                referred to as ``compensating balances'', on 
                deposit at such institutions; and
                    (B) using imputed interest on such funds to 
                offset charges for the various depositary and 
                financial agency services provided to or on 
                behalf of the Government.
            (2) As a result of sharp declines in interest rates 
        over the last few years to record low levels, or the 
        public debt outstanding reaching the statutory debt 
        limit, the Department of the Treasury often has had to 
        dramatically increase or decrease the size of the 
        compensating balances on deposit at these financial 
        institutions.
            (3) The fluctuation of the compensating balances, 
        and the necessary pledging of collateral by financial 
        institutions to secure the value of compensating 
        balances placed with those institutions, have created 
        unintended financial uncertainty for the Secretary of 
        the Treasury and for the management by financial 
        institutions of their cash and securities.
            (4) It is imperative that the process for providing 
        financial services to the Government be transparent, 
        and provide the information necessary for the Congress 
        to effectively exercise its appropriation and oversight 
        responsibilities.
            (5) The use of direct payment for services rendered 
        would strengthen cash and debt management 
        responsibilities of the Secretary of the Treasury 
        because the Secretary would no longer need to 
        dramatically increase or decrease the level of such 
        balances when interest rates fluctuate sharply or when 
        the public debt outstanding reaches the statutory debt 
        limit.
            (6) An alternative to the use of compensating 
        balances, such as direct payments to financial 
        institutions, would ensure that payments to financial 
        institutions for the services they provide would be 
        made in a more predictable manner and could result in 
        cost savings.
            (7) Limiting the use of compensating balances could 
        result in a more direct and cost-efficient method of 
        obtaining those services currently provided under 
        compensating balance arrangements.
            (8) A transition from the use of compensating 
        balances to another compensation method must be 
        carefully managed to prevent higher-than-necessary 
        transitional costs and enable participating financial 
        institutions to modify their planned investment of cash 
        and securities.
    (b) Authorization of Appropriations For Services Rendered 
by Depositaries and Financial Agencies of the United States.--
There are authorized to be appropriated for fiscal years 
beginning after fiscal year 2003 to the Secretary of the 
Treasury such sums as may be necessary for reimbursing 
financial institutions in their capacity as depositaries and 
financial agents of the United States for all services required 
or directed by the Secretary of the Treasury, or a designee of 
the Secretary, to be performed by such financial institutions 
on behalf of the Secretary of the Treasury or another Federal 
agency, including services rendered before fiscal year 2004.
    (c) Orderly Transition.--
            (1) In general.--As appropriations authorized in 
        subsection (b) become available, the Secretary of the 
        Treasury shall promptly begin the process of phasing in 
        the use of the appropriations to pay financial 
        institutions serving as depositaries and financial 
        agents of the United States, and transitioning from the 
        use of compensating balances to fund these services.
            (2) Post-transition use limited to extraordinary 
        circumstances.--
                    (A) In general.--Following the transition 
                to the use of the appropriations authorized in 
                subsection (b), the Secretary of the Treasury 
                may use the compensating balances to pay 
                financial institutions serving as depositaries 
                and financial agents of the United States only 
                in extraordinary situations where the Secretary 
                determines that they are needed to ensure the 
                fiscal operations of the Government continue to 
                function in an efficient and effective manner.
                    (B) Report.--Any use of compensating 
                balances pursuant to subparagraph (A) shall 
                promptly be reported by the Secretary of the 
                Treasury to the Committee on Financial Services 
                of the House of Representatives and the 
                Committee on Banking, Housing, and Urban 
                Affairs of the Senate.
            (3) Requirements for orderly transition.--In 
        transitioning to the use of the appropriations 
        authorized in subsection (b), the Secretary of the 
        Treasury shall take such steps as may be appropriate 
        to--
                    (A) prevent abrupt financial disruption to 
                the functions of the Department of the Treasury 
                or to the participating financial institutions; 
                and
                    (B) maintain adequate accounting and 
                management controls to ensure that payments to 
                financial institutions for their banking 
                services provided to the Government as 
                depositaries and financial agents are accurate 
                and that the arrangements last no longer than 
                is necessary.
            (4) Reports required.--
                    (A) Annual report.--
                            (i) In general.--For each fiscal 
                        year, the Secretary of the Treasury 
                        shall submit a report to the Congress 
                        on the use of compensating balances and 
                        on the use of appropriations authorized 
                        in subsection (b) during that fiscal 
                        year.
                            (ii) Inclusion in budget.--The 
                        report required under clause (i) may be 
                        submitted as part of the budget 
                        submitted by the President under 
                        section 1105 of the title 31, United 
                        States Code, for the following fiscal 
                        year and if so, the report shall be 
                        submitted concurrently to the Committee 
                        on Financial Services of the House of 
                        Representatives and the Committee on 
                        Banking, Housing, and Urban Affairs of 
                        the Senate.
                    (B) Final report following transition.--
                            (i) In general.--Following 
                        completion of the transition from the 
                        use of compensating balances to the use 
                        of the appropriations authorized in 
                        subsection (b) to pay financial 
                        institutions for their services as 
                        depositaries and financial agents of 
                        the United States, the Secretary of the 
                        Treasury shall submit a report on the 
                        transition to the Committee on 
                        Financial Services of the House of 
                        Representatives and the Committee on 
                        Banking, Housing, and Urban Affairs of 
                        the Senate.
                            (ii) Contents of report.--The 
                        report submitted under clause (i) shall 
                        include a detailed analysis of--
                                    (I) the cost of transition;
                                    (II) the direct costs of 
                                the services being paid from 
                                the appropriations authorized 
                                in subsection (b); and
                                    (III) the benefits realized 
                                from the use of direct payment 
                                for such services, rather than 
                                the use of compensating balance 
                                arrangements.
    (d) Technical Amendment.--The 2d undesignated paragraph of 
section 16 of the Federal Reserve Act (12 U.S.C. 412) is 
amended--
            (1) in the 3d sentence, by inserting ``or any other 
        asset of a Federal reserve bank'' before the period at 
        the end; and
            (2) in the last sentence, by inserting ``, or are 
        otherwise held by or on behalf of,'' after ``in the 
        vaults of''.
    (e) Effective Date.--Notwithstanding section 20, this 
section shall take effect on the date of the enactment of this 
Act.

SEC. 20. EFFECTIVE DATE.

    This Act shall take effect at the end of the 12-month 
period beginning on the date of the enactment of this Act, 
except as otherwise specifically provided in this Act.
    And the Senate agree to the same.

                For consideration of the House bill and the 
                Senate amendment, and modifications committed 
                to conference:
                                   Michael G. Oxley,
                                   Spencer Bachus,
                                   Steven C. LaTourette,
                                   Melissa A. Hart,
                                   Patrick J. Tiberi,
                                   Barney Frank,
                                   Harold E. Ford, Jr.,
                                 Managers on the Part of the House.

                                   Richard C. Shelby,
                                   Robert F. Bennett,
                                   Wayne Allard,
                                   Paul S. Sarbanes,
                                   Tim Johnson,
                                Managers on the Part of the Senate.
       JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE

    The managers on the part of the House and the Senate at the 
conference on the disagreeing votes of the two Houses on the 
amendment of the Senate to the bill (H.R. 1474), to facilitate 
check truncation by authorizing substitute checks, to foster 
innovation in the check collection system without mandating 
receipt of checks in electronic form, and to improve the 
overall efficiency of the Nation's payments system, and for 
other purposes, submit the following joint statement to the 
House and the Senate in explanation of the effect of the action 
agreed upon by the managers and recommended in the accompanying 
conference report:
    The Senate amendment struck all of the House bill after the 
enacting clause and inserted a substitute text.
    The House recedes from its disagreement to the amendment of 
the Senate with an amendment that is a substitute for the House 
bill and the Senate amendment.
      The Managers on the part of the House and the Senate met 
on October 1, 2003 (the House chairing), and reconciled the 
differences between the House bill and the Senate amendment.
      The differences between the House bill, the Senate 
amendment, and the substitute agreed to in conference are noted 
below, except for clerical corrections, conforming changes made 
necessary by agreements reached by the conferees, and minor 
drafting and clarifying changes.

         Short Title; Table of Contents; Findings and Purposes

House Bill
      Section 1 of the House bill establishes the short title 
of the bill, the ``Check Clearing for the 21st Century Act,'' 
or the ``Check 21 Act'', and provides the findings and purposes 
of the legislation.
Senate Amendment
      Section 1 of the Senate amendment provides the short 
title of the bill, the ``Check Truncation Act of 2003'', and a 
table of contents. Section 2 of the Senate amendment also 
provides the findings and purposes of the legislation.
Conference Agreement
      The Senate recedes to the House.

                              Definitions

House Bill
      Section 2 of the House bill defines certain terms, 
including ``substitute check,'' ``reconverting bank,'' 
``collecting bank,'' ``depositary bank,'' ``claimant bank,'' 
and ``truncate.''
Senate Amendment
      Section 3 of the Senate amendment defines certain terms, 
including ``indemnifying bank'', ``MICR line'', ``reconverting 
bank'', ``truncate'' and ``substitute check''.
Conference Agreement
      The House recedes to the Senate with an amendment 
removing the definition of ``claimant bank''.

             General Provisions Governing Substitute Checks

House Bill
      Section 3 of the House bill allows a person to deposit, 
present, or send for collection or return a substitute check 
without an agreement with the recipient. This section mandates 
that a substitute check have the legal equivalence of an 
original check if the substitute check: (i) accurately 
represents all of the information on the front and back of the 
original check at the time the original check was truncated; 
and (ii) contains the legend ``this is a copy of your check. 
You can use it the same way you would use the original check.''
      The reconverting bank must ensure that the substitute 
check bears all the endorsements applied by all of the parties 
that previously handled the check and must identify itself as 
the reconverting bank.
Senate Amendment
      Section 4 of the Senate amendment allows a person to 
deposit, present or send for collection or return a substitute 
check without an agreement with the recipient. This section 
mandates that a substitute check have the legal equivalence of 
an original check if the substitute check: (i) accurately 
represents all of the information on the front and back of the 
original check at the time the original check was truncated; 
and (ii) contains the legend ``this is a copy of your check. 
You can use it the same way you would use the original check.''
      The reconverting bank must ensure that the substitute 
check bears all the endorsements applied by all of the parties 
that previously handled the check and shall identify itself as 
the reconverting bank.
Conference Agreement
      This provision is not in disagreement.

                      Substitute Check Warranties

House Bill
      Section 4 of the House bill provides that a bank that 
transfers, presents or returns a substitute check and receives 
consideration for the check is deemed to have warranted that 
the substitute check meets all requirements for legal 
equivalence and that no entity will be asked to make a payment 
on a check already paid.
Senate Amendment
      Section 5 of the Senate amendment states that a bank that 
transfers, presents or returns a substitute check and receives 
consideration for the check is deemed to have warranted that 
the substitute check meets all requirements for legal 
equivalence and that no entity will be asked to make a payment 
on a check already paid.
Conference Agreement
      This provision is not in disagreement.

                               Indemnity

House Bill
      Section 5 of the House bill grants an indemnity to the 
transferee by a reconverting bank and each bank that 
subsequently transfers, presents or returns a substitute check 
and receives consideration for the transfer, presentment, or 
return up to either the amount of the loss proximately caused 
by the breach of the warranty provided in section 4 or, in the 
absence of such a breach, the amount of any loss up to the 
amount of the substitute check plus any interest or expenses.
      This section also allows for comparative negligence if a 
loss results in whole or in part from the negligence or failure 
to act in good faith on the part of the indemnified party, 
reducing that party's indemnification by the amount of 
negligence or bad faith.
Senate Amendment
      Section 6 of the Senate amendment bill grants an 
indemnity to the transferee by a reconverting bank and each 
bank that subsequently transfers, presents or returns a 
substitute check and receives consideration for such transfer, 
presentment or return up to either the amount of the loss 
proximately caused by the breach of the warranty provided in 
section 4 or, in the absence of such a breach, the amount of 
any loss up to the amount of the substitute check plus any 
interest or expenses.
      This section also allows for comparative negligence if a 
loss results in whole or in part from the negligence or failure 
to act in good faith on the part of the indemnified party, 
reducing that party's indemnification by the amount of 
negligence or bad faith. Section 6(c)(2) of this section states 
that nothing in the comparative negligence provisions of 
section 6(c)(1) reduces consumer's rights under other laws.
Conference Agreement
      The House recedes to the Senate.

                    Expedited Recredit for Consumers

House Bill
      Section 6 of the House bill provides an expedited 
recredit to a consumer if the consumer asserts that the bank 
charged the customer's account improperly or the customer has a 
warranty claim with respect to the substitute check. The 
customer must show that they suffered a loss and that the 
production of the original or a better copy of the original is 
necessary to determine the validity of any claim. This claim 
must be made within 30 days after receiving their periodic 
statement and may have an additional 30 days to file a claim 
under extenuating circumstances. According to this section, if 
the bank has not determined if the claim is valid within 10 
business days, the bank must recredit the lesser of the amount 
charged, or $2,500 with interest and any remaining amount must 
be recredited within 45 calendar days. Additionally, a consumer 
does not have to be in possession of the substitute check in 
order to make a claim.
Senate Amendment
      Section 7 of the Senate amendment requires the consumer 
to make a claim for expedited recredit within 40 days after the 
bank transmits the periodic statement or receipt of the 
substitute check, whichever is later. Under extenuating 
circumstances, including extended travel or illness of the 
consumer, the bank shall extend the period for a reasonable 
amount of time.
      Section 7(c)(1)(B) requires that banks do not have to 
provide copies of documentation relied upon in denying an 
expedited recredit claim. Instead, a bank must provide a 
statement of right of the consumer to request such 
documentation.
Conference Agreement
      The Conference Agreement consists of the Senate 
provisions relating to (1) the time period for expedited 
recredit; (2) the extension of the time period for expedited 
recredit; and (3) allowing electronic submission of expedited 
recredit claims. Further, the Conference Agreement provides 
that, when resolving customer claims, the delivered copy of the 
original check must read that the check ``accurately represents 
all the information'' on the original check standard and that 
the bank does not have to provide copies of documentation 
relied upon in denying expedited recredit claim. Instead, a 
bank must provide a statement of the right of the consumer to 
request such documentation.
      The Conference Agreement also adopts the House provision 
providing that a consumer who receives a substitute check does 
not need to currently have the substitute check to make a claim 
for expedited recredit.

                Expedited Recredit Procedures for Banks

House Bill
      Section 7 of the House bill permits a bank to make a 
claim against an indemnifying bank for an expedited recredit if 
the claimant's customer has made a claim for recredit, the 
claimantbank has suffered a loss, and production of the 
original check, a substitute check or a better copy of the check is 
necessary to determine the validity of the charge. This claim must be 
made within 120 days of the transaction. This claim must be in writing 
and must describe the claim and demonstrate a loss.
Senate Amendment
      Section 8 of the Senate amendment permits a bank to make 
a claim against an indemnifying bank for an expedited recredit 
if the claimant's customer has made a claim for recredit, the 
claimant bank has suffered a loss, and production of the 
original check, a substitute check or a better copy of the 
check is necessary to determine the validity of the charge. 
This claim must be made within 120 days of the transaction. 
This claim must be in writing and must describe the claim and 
demonstrate a loss.
Conference Agreement
      This provision is not in disagreement.

                         Delays in an Emergency

House Bill
      Section 8 of the House bill permits delays in compliance 
with the provisions of this legislation if they are caused by 
circumstances beyond the control of a bank, and if the bank 
used such diligence as the circumstances require.
Senate Amendment
      Section 9 of the Senate amendment permits delays in 
compliance with the provisions of this legislation if they are 
caused by circumstances beyond the control of a bank, and if 
the bank used such diligence as the circumstances require.
Conference Agreement
      This provision is not in disagreement.

                           Measure of Damages

House Bill
      Section 9 of the House bill makes persons who breach a 
warranty or fail to comply with the bill, or regulations under 
the bill, liable for the lesser of the amount of the loss or 
the amount of the substitute check plus interest and expenses. 
This section applies a comparative negligence standard for the 
determination of damages.
Senate Amendment
      Section 10 of the Senate amendment makes persons who 
breach a warranty or fail to comply with the bill, or 
regulations under the bill, liable for the lesser of the amount 
of the loss or the amount of the substitute check plus interest 
and expenses. This section applies a comparative negligence 
standard for the determination of damages.
      The amendment also provides that nothing in the 
comparative negligence provision of section 10(b)(1) reduces 
consumer's rights under other laws.
Conference Agreement
      The House recedes to the Senate.

               Statute of Limitations and Notice of Claim

House Bill
      Section 10 of the House bill provides for a 1 year 
statute of limitations from the time that the customer learns 
of the claim.
Senate Amendment
      Section 11 of the Senate amendment provides for a 1 year 
statute of limitations from the time that the customer learns 
of the claim.
Conference Agreement
      This provision is not in disagreement.

                           Consumer Awareness

House Bill
      Section 11 of the House bill requires that each bank 
provide notice to its customers describing the process of check 
substitution and a description of the consumer recredit 
provision. This section applies to both new and existing 
customers.
Senate Amendment
      Section 12 of the Senate amendment states that notice to 
consumers only has to be sent if consumers get their original 
checks or substitute checks back in their periodic statements.
      Banks also must provide notice to customers that request 
a copy of a check and receive a substitute check from the bank.
      Banks must provide customers that receive original checks 
or substitute checks with a brief informative notice for the 
first three years that the Act is in effect.
Conference Agreement
      The Conference Agreement adopts the House position 
regarding the permanence of the consumer notice provisions.
      The Conference Agreement also merges language from Senate 
section 12(b)(1)(C) and House section 11(b). The Conference 
Agreement adopts the Senate provision regarding the 9 month 
time frame within which the FRB must publish model language and 
requiring notice to include (i) description of substitute check 
process; and (ii) description of consumer recredit rights.

                          Effect on Other Law

House Bill
      Section 12 of the House bill supersedes any inconsistent 
Federal or State laws to the extent of the inconsistency.
Senate Amendment
      Section 13 of the Senate amendment supersedes any 
inconsistent Federal or State laws to the extent of the 
inconsistency.
Conference Agreement
      This provision is not in disagreement.

                         Variation by Agreement

House Bill
      Section 13 of the House bill permits provisions of 
section 7 to be varied by the banks involved.
Senate Amendment
      Section 17 of the Senate amendment permits provisions of 
section 8 to be varied by the banks involved.
Conference Agreement
      The Conference Agreement makes only technical changes 
related to cross-references and maintains the substance of both 
provisions.

                              Regulations

House Bill
      Section 14 of the House bill allows the Federal Reserve 
to write regulations related to the operation of this 
legislation. Additionally, the Federal Reserve is required to 
report on the increased speed of check processing and the 
prices it charges for transportation services.
Senate Amendment
      Sections 14 and 15 of the Senate amendment allows the 
Federal Reserve to regulate the operation of this legislation. 
However, it differs in the study and monitoring of funds 
available. The Senate amendment mandates a study of 
implementation of the Act, including impact on funds 
availability.
Conference Agreement
      The Conference Agreement adopts the Senate provisions 
regarding the authority of the Federal Reserve to issue 
regulations as it deems necessary to implement, prevent, 
circumvent or evasion of, or facilitate compliance with the 
legislation and the reporting requirements.
      The Conferees also agree to a provision which requires 
the Federal Reserve Board to publish statistical data on costs 
and revenue related to transporting commercial checks 
(exclusive of the checks the reserve banks handle as fiscal 
agents) between Federal Reserve Bank offices by air or ground 
couriers. In the past, such statistics have been of interest to 
certain organizations. This provision does not mandate specific 
methodologies for imputing or estimating revenues. Further, 
this section does not change the Monetary Control Act's 
requirement that the Federal Reserve Banks, over the long run, 
recover the costs of their priced services or affect the 
Federal Reserve Board's ability under its pricing principles to 
determine what constitutes a major service category.
      The House recedes to the Senate on a funds availability 
study.

            Evaluation and Report by the Comptroller General

House Bill
      The House bill contains no similar provision.
Senate Amendment
      Section 16 of the Senate amendment provides for the 
Comptroller General of the United States to evaluate the 
implementation and administration of this bill within 5 years.
Conference Agreement
      The House recedes to the Senate.

           Depositary Services Efficiency and Cost Reduction

House Bill
      The House bill contains no similar provision.
Senate Amendment
      The Senate amendment contains no similar provision.
Conference Agreement
      The Conference Agreement includes language requested by 
the Department of Treasury which authorizes the Treasury 
Department to directly compensate financial institutions that 
provide depositary services to the Federal Government.
      Additionally, the Conference Agreement includes language 
requested by the Federal Reserve Board to effect technical 
changes to the Federal Reserve Act in the way currency is 
collateralized which will allow for greater liquidity in case 
of a national emergency.

                             Effective Date

House Bill
      Section 15 establishes the effective date as 18 months 
after the date of enactment.
Senate Amendment
      Section 18 establishes the effective date as 12 months 
after the date of enactment.
Conference Agreement
      The House recedes to the Senate.
                For consideration of the House bill and the 
                Senate amendment, and modifications committed 
                to conference:
                                   Michael G. Oxley,
                                   Spencer Bachus,
                                   Steven C. LaTourette,
                                   Melissa A. Hart,
                                   Patrick J. Tiberi,
                                   Barney Frank,
                                   Harold E. Ford, Jr.,
                                 Managers on the Part of the House.

                                   Richard C. Shelby,
                                   Robert F. Bennett,
                                   Wayne Allard,
                                   Paul S. Sarbanes,
                                   Tim Johnson,
                                Managers on the Part of the Senate.